Senate Passes Pension Bill

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By an overwhelming 95 to 5 majority vote, the U.S. Senate passed a major piece of pension legislation on Thursday night. The legislation strengthens pension-funding rules by mandating that companies fully honor pension obligations within seven years, without shifting the financial burden to U.S. taxpayers.

The 900-page bill, H.R. 4, which was passed by the House last week, is ready to be sent to the President for approval. The pension vote was the final action taken by the Senate before the lawmakers left for a month-long summer recess; they return to work on September 4.

Senate Majority Leader Bill Frist (R-Tenn.), who called the legislation the “most extensive reforms to U.S. pension laws in more than 30 years,” says that the Pension Protection Act makes permanent the retirement-security provisions of the 2001 tax bill related to pension plans and individual retirement accounts. According to Frist, passage of the bill “is a major step toward making President Bush’s tax cuts permanent.”

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In effect, the bill amends the Employee Retirement Income Security Act and the Internal Revenue Code to establish new minimum funding standards for single- and multiemployer defined benefit pension plans.

The bipartisan act also shields taxpayers from assuming airline pension plan obligations, noted Frist in a statement. He added that the bill addresses several other key pension issues, noting that it will tighten funding requirements so employers make more cash contributions to pension funds, close loopholes that allow underfunded plans to skip cash pension payments, prohibit employers and union leaders from promising extra benefits if pension plans are significantly underfunded, and strengthen disclosure rules to give workers and retirees more information about the status of their pension plan.

In addition, executive-compensation packages known as “golden parachutes” will be restricted if the pension plans of rank-and-file employees are at risk. Further, added Frist, taxpayers will be protected from a potential multibillion-dollar bailout of the federal Pension Benefit Guaranty Corp.